National housing prices hit record in February

Largest increase since 2006: index

Canadian home prices posted a record jump for the month of February, fuelled by the Toronto, Hamilton and Vancouver markets.

The Teranet-National Bank national composite house price index gained 1.0 per cent for the month, the largest February increase in the 18-year history of the index.

Toronto soared a record 1.9 per cent, while Hamilton gained 1.4 per cent, also a record increase. Vancouver added 1.4 per cent.

However the story wasn’t the same across the country as seven of the 11 major cities tracked posted a drop for February. Halifax slipped 1.9 per cent, while Calgary fell 1.3 per cent.

Compared with a year earlier, the index was up 13.4 per cent, the largest 12-month increase since 2006.

The year-over-year jump was due to a record 23.0 per cent increase in Toronto and a 19.7 per cent gain in Hamilton, also a record.

National Bank senior economist Marc Pinsonneault said the Toronto market was “especially worrisome.”

“In a city where apartments account for only 26 per cent of home sales, affordability of other types of dwellings has become an acute problem,” he wrote in a note.

However, he noted that there are regional differences.

“In order to accurately assess the Canadian home resale market, it is essential to recognize the dichotomy between markets like Toronto, Hamilton and Victoria, where price growth is in the double digits, and other markets where the progression of home prices has been much more moderate, if not negative,” Pinsonneault wrote.

A red-hot housing market in Toronto has raised concerns in recent months and prompted talk about a foreign buyers tax like the one instituted in Vancouver.

The B.C. government brought in a 15 per cent tax on foreign buyers last August.

Prices in Vancouver, while up in February compared with a year ago, are off their highs set in September as measured by the Teranet-National Bank index. The number of sales in the city has also decreased.

The price index came one day ahead of the latest home sales figures from the Canadian Real Estate Association expected Wednesday.

Earlier this week, a new report suggested a foreign buyer tax alone can’t solve Toronto’s soaring housing prices.

The report, titled “In High Demand” and released Monday by Ryerson University’s City Building Institute, favours a tax on foreign buyers — similar to the one introduced in Vancouver last summer — but suggests it should be implemented in addition to a “progressive surtax” on expensive homes owned by people who aren’t paying income tax, including people with foreign capital.

“The surtax essentially gets wiped out if you’re earning money locally and paying taxes locally or in Canada,” said report author Josh Gordon, an assistant professor at Simon Fraser University.

It’s a system that hasn’t been implemented elsewhere, Gordon said, though it was first proposed several months ago by his colleague Rhys Kesselman.

The surtax would target foreign buyers who don’t contribute to the local labour market, as well as wealthy Canadian citizens who have “aggressively evaded taxes,” the report said.